11 Stages of the Accounting Cycle

1. Transaction

An exchange between two parties where both expect to benefit.

2. Journal Entry

Using the tool of debit and credit to put the transaction into the accounting equation.

3. Post to Ledger

A list of all accounts and their current balance.

4. Trial Balance

A list of all accounts, their debit, or credit balance, to ensure debits = credits

5. Adjusting Journal Entry

Updating accounts for transactions that occur over time.

6. Post to Ledger

See #3( A list of all accounts and their current balance. )

7. Adjusted Trial Balance

See #4 (A list of all accounts, their debit, or credit balance, to ensure debits = credits)

8. Financial Statements

Create the income statement, statement of owner's equity and balance sheet (Eventually also includes statement of cash flows)

9. Closing Journal Entries

Journal entries to zero out all of the nominal or temporary accounts (revenue, expense, drawings)

10. Post to Ledger

See #3 (A list of all accounts and their current balance.)

11. Post-Closing Trial Balance

See #4 (A list of all accounts, their debit, or credit balance, to ensure debits = credits)